Release Date: May 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Godrej Properties Ltd (BOM:533150, Financial) achieved its highest-ever quarterly and annual sales, with booking values for Q4 standing at INR 9,519 crores, up 135% year-on-year.
- The company recorded its highest-ever cash collections and net operating cash flow, with collections at INR 4,693 crores for Q4 and INR 11,436 crores for the full year.
- Godrej Properties Ltd (BOM:533150) reduced net debt by over INR 700 crores in Q4 despite strong business development investment.
- The company entered the Hyderabad market with two land deals, adding an estimated booking value potential of nearly INR 5,000 crores.
- Godrej Properties Ltd (BOM:533150) provided strong guidance for FY '25, aiming to grow residential bookings by over 20% to INR 27,000 crores.
Negative Points
- The company faces execution risk, as indicated by the need to present a range of potential outcomes in their pro forma P&L.
- There is a dependency on market conditions for achieving the projected growth, particularly in NCR and Mumbai.
- The family settlement agreement introduces some uncertainty regarding the future use of the Godrej brand and potential competition from Godrej & Boyce.
- The company's business development guidance of INR 20,000 crores for the next year may be seen as conservative given the current market conditions.
- There is a significant reliance on new project launches to meet the ambitious sales targets, which could be impacted by delays in approvals or market reception.
Q & A Highlights
Q: Congratulations on the strong numbers that we have seen. Sir, with the scale that we have achieved on sales now, I mean, what's the medium-term target looks like? I know -- I mean, you've given a strong guidance for '25, but what's the view from a 3-year basis now?
A: Thanks, Abhinav. I think the base certainly is more demanding now than it has been in past years. So I think we'd like to stick with our guidance of 20% growth over medium term. Of course, it might get calibrated upwards or downwards basis on market conditions and how strong business development additions from here are, but over the next few years, I think the 20% number remains the aspiration. (Pirojsha Godrej, Executive Chairman of the Board)
Q: Okay. And for FY '25, if you can help us, I mean, on the guidance, how much can we say volumes versus pricing?
A: I think it will depend a little bit on the mix and what approvals, et cetera, comes through, but if you look at it over the last year, I think this has been a fair mix of growth in volumes, which last year was 31%, a year before that 40%. And I think pricing is in 2 parts, it's important to remember, one is actual pricing growth for the same projects because of market conditions. I think a lot of GPL growth has come from repositioning the company into a stronger set of locations and the pricing growth that has accompanied that. I think you really have to break up the booking value growth into 3 buckets. One is kind of volume growth. The second is repositioning or kind of improved project portfolio growth, and the last is like-to-like pricing growth. And I think all 3 will continue to contribute in the year ahead. (Pirojsha Godrej, Executive Chairman of the Board)
Q: Sir, also, if I may ask a little bit of clarity on the family agreement that just came out, yesterday. So a few questions there. Firstly, is it -- can you clarify the MoU that we have for the Vikhroli development, it will continue beyond the 6-year exclusivity period because I understand there is some sort of apprehension out there.
A: Thanks, Abhinav. Yes, it's very clear that DM has already been in place for many years and will continue exactly as is and is applicable for the entire Vikhroli land. There is no time-bound period to which it is applicable. So Godrej Properties will act as the development manager in partner Godrej & Boyce, which is the landowner and developer of the of the development. So we greatly look forward to playing a role in that project. And we are quite happy that after several years, in Q4, we actually had a launch under this development management relationship. We launched the project for Godrej Vistas, which is off to a good beginning. So hope to see a lot more activity in Vikhroli in the years ahead. But just to be very clear, there's certainly no time limit after which the DM doesn't continue. (Pirojsha Godrej, Executive Chairman of the Board)
Q: Great. And sir, just the last question from my side. On the exclusivity part also, so how does the usage of brand name work, say, in the next 6 years and even beyond that? I mean how do you see that as such?
A: Abhinav, as part of this understanding for all -- each side existing categories, there is an agreement that we won't use the brand and won't compete with each other in those cases. So for real estate, let me clarify how this works. For the first six years, Godrej & Boyce is not going to do any real estate development outside of land that it already owns today. So on the land that it owns today, Vikhroli, of course, being the main one of those, it is free to do development, including using the Godrej brand, but it cannot do any development on new land parcels beyond that. Post the 6-year period, Godrej & Boyce is free to do development on other lands but cannot use the Godrej brand for those developments. So that is a very important distinction. I should also point out that Godrej & Boyce has an existing construction business and that is actually their exclusive business. So while Godrej Properties is free to do construction for its captive purposes of developing its own projects, if we ever wanted to backward integrate, we are free to do so, but we will not be for 6 years able to do third-party construction services for other developers or other companies. And after a 6-year period, we can provide such services, but we won't be using the Godrej brand for that. And that is true across all categories that one or the other side has a presence in. I think there has been a little bit of confusion on this saying that they can be competing Godrej Developers, et cetera, that is not at all the case. The development to Godrej & Boyce from a property development perspective for the next 6 years is entirely limited to land they already own. Of course, the most important of those lands is Vikhroli, which will be developed through the DM. And post 6 years, while they are absolutely free to set up a real estate development company, it would have to operate without the Godrej brand. (Pirojsha Godrej, Executive Chairman of the Board)
Q: Congratulations on a great year. So just delving a little bit more on the family settlement agreement. So now with this in place, do you think there will be acceleration in launches because we have so much of land in Vikhroli? So now all these issues ironed out, do you think we can get at least every year a launch coming in from the Vikhroli land?
A: I think as we indicated in the press release, the timing of launches in Vikhroli will be largely determined by Godrej & Boyce. But certainly, I think this clarity will aid in there being more momentum to this process. And as I said, I'm very happy that we've launched the project under this arrangement after 3 years in Q4 and would certainly hope to see many more such projects ahead. (Pirojsha Godrej, Executive Chairman of the Board)
Q: And this 10% DM, so is there any change there or it will be same post the settlement?
A: There is absolutely no change to the agreement of any kind. It's exactly what it was, which is, as you said, 10% of top line. (Pirojsha Godrej, Executive Chairman of the Board)
Q: Okay. And just the last question
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
